Copom resumes monetary tightening and raises Selic rate at September meeting (Image: REUTERS/Adriano Machado)
O Monetary Policy Committee (Copom) raised the Selic rate by 0.25 percentage points (pp) at the meeting this Wednesday (18), in a unanimous decision. The basic rate of fees went from the level of 10.50% to 10.75% per year.
To make the decision, the directors considered “the evolution of the disinflation process, the balance of risks and the broad set of information available”.
“The scenario, marked by resilience in activity, pressures in the labor market, a positive output gap, rising inflation projections and unanchored expectations, demands a more contractionary monetary policy,” they say in the statement.
The decision is in line with market expectations, which were already expecting a resumption of monetary tightening, after the more relaxed tone hawkish of the directors in the latest communications.
No Focus Bulletin last week, including the economists consulted by Banco Central (BC) raised their bets for the Selic rate at the end of 2024 to 11.25%, predicting a 0.25 pp increase at the September meeting.
The directors understand that the increase is compatible with the strategy of converging inflation towards the target over the relevant horizon. Furthermore, it implies smoothing out fluctuations in the level of economic activity and fostering full employment.
The trajectory of Selic
In the last two meetings, in June and July, the BC Committee chose to keep the Selic rate stable at 10.50%.
From August 2023 to May 2024, the autarchy went through a period of monetary policy easing. The cycle included a reduction of 0.25 pp and another six of 0.50 pp.
Before starting the easing, the BC kept the Selic at 13.75% for one year, starting in August 2022. The monetary tightening cycle, which preceded this pause, began in March 2021 and continued for 12 meetings.
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